Q2 2020 Greenlight Capital Re Ltd Earnings Call

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Good day and thank you for joining the Greenlight re conference call for the second quarter 2020 earnings.

The company remind you that forward looking statements that may have been made in this call are intended to be covered by the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Forward looking statements are not statements of historical facts, but rather reflect the company's current expectations estimates and predictions about future results and events that are subject to risks uncertainties assumptions, including those in your weighted by the company's form 10-K slash.

For the year ended December 31st 2019, and other documents filed by the company with the FTC.

If one or more risks or uncertainties materialize or if the company the underlying assumptions prove to be incorrect actual results may vary materially promote the company projects. The company undertakes no obligation to update publicly or revise any forward looking statements, whether as a result of new information future events or otherwise except required Bible.

After the prepared remarks, we will be conducting a question answer session for those that we'd like to ask your question. Please press Star then one to be answered the question Keith.

I would now like to turn the conference over to Greenlight re CEO Mr. Steinberg. Please go ahead Sir.

Good morning, Thank you for joining our call today.

I'm pleased to report that we made solid progress in several fronts during the quarter. Our underwriting result, excluding the impact of covert 19, which I'll discuss shortly generated a combined ratio of 95.7%.

This result continues the trend of improved underlying performance and reflects the repositioning of our underwriting business over the past three years.

During this time, we have expanded the lines of business, we write an increased our participation in excess of loss contracts when the economic supported that by replacing some of our lower performing quota share contracts with higher margin business.

It is notable that over the past three years, we have decided to not renew approximately two thirds of the premium that was in force as of July 2017.

So we have been acutely selective of the business that we keep.

Looking forward the improvement in market conditions that started last year is now accelerating over the past few months, we have seen risk placements and specialty classes with significantly improved terms.

We have also seen that attempts to place risks with only modest pricing improvements are often met with shortfalls in capacity a clear sign of a healthy market.

Given the recent timing of these more significant pricing movements the impacts on our income statement. This quarter is negligible. Although we are optimistic that we will see the benefit over the next year.

Our exposure to the pandemic continues to be manageable and small in comparison to the industry as a whole a result that reflects several factors.

We have minimal exposure to some of the highly expose lines of business way coverages uncontested, such as event cancellation travel insurance trade credits directors and officers liability on long term life.

While the mortgage market has seen an increase in delinquencies the financial impacts on our portfolio has been offset by reductions in profit commissions, we paid to us seedings. Additionally over the last two years, we cut back on the amounts as mortgage business, we rights, which reduces our exposure to the new and therefore riskier.

Underlying mortgage contracts.

As we anticipated our auto business has shown a reduction in claim frequency through the long time period in the U.S.

Our second quarter coated 19, net loss estimates of $6 million contributed 5.5 points to on total combined ratio of 101.2%.

This loss estimate relates primarily to our Lloyd's multi class contracts and certain property catastrophe contracts with identifiable business interruption exposure.

Regarding our key financial metric, we grew book value per share by 1.5% as we took advantage of the opportunity to repurchase shares to significant discount to book.

On the investment side, David will discuss solace glass the broader environments in a moment, but it's notable that contributing to our overall investment results. This quarter is a gain of $3.3 million in the valuation of certain strategic investments made by our innovations unit.

The pandemic has exposed both winners and losers among our innovation partners and overall I'm pleased with our progress and excited about the divisions potential.

Finally, and best recently concluded its annual review with the decision to affirm our a minus rating.

Ratings pressure has been a common theme in the industry in recent months with several notable ratings downgrades. We are pleased with and best decision and I look forward to executing our plans to build shareholder value as we move into much improved market conditions.

Now I'd like to turn the call over to David.

Thanks, Simon and good morning, everyone.

Solace glass foundry turned 0.3% in the second quarter.

Thanks contributed 7.6%, while the Schwartz detracted, 7.3% and macro is essentially flat during the quarter. The S&P 500 index or turned 20.5%.

Long positions in Green brick partners to come worse company, and Brighthouse financial where the biggest winners green brick partners returned 47% as the company reported record breaking Q1 results in margin growth. Despite covered related disruptions over the past couple of years green brick and strategically diversified voltage geographic footprint.

And product line, including growing its entry level segment.

Management expects team proved affordability of its product line to allow the company to maintain or even grow its market share and the current economic climate.

<unk> reported very strong second quarter earnings on Tuesday, and the stock appreciated putting August off to a good start.

Shares have come Moore's climbed 73% in second quarter as the broader market rally and fears over the company's liquidity position abated on its first quarter earnings call management announced significant cost cuts and capex reductions in anticipation of several challenging quarters ahead.

Additionally, resilient demand in some of can Moore's U.S. end markets, including do it yourself paint and single family home building.

I have helped offset weaknesses in other markets such as automotive team.

Brighthouse financial returned 15% in the second quarter, yet remain down 29% on the year as of June Thirtyth.

In May the company announced first quarter GAAP earnings per share of $47 much more than the entire price of the company shares due to its market hedges bright house accelerated share repurchase as buying back a total 12% of the stocks during the first four months of the year.

Management reiterated its target repurchasing $1.5 billion total by the end of 2021, implying that the company intends to purchase roughly an additional quarter of the current shares outstanding over the next 18 months book value at the end of the first quarter was $172 per share at the stock trades is only 16% of that amount and just.

3.3 times adjusted earnings.

Our Tesla short detracted from performances the talk more than doubled in the quarter. The commie surprise the market by reporting a first quarter profit in April despite a week's long shutdown of its production facilities due to the pandemic.

Profit was largely driven by a sharp increase in regulatory credit sales the accounting for which we doubt conforms to gap has it doesn't match the expense recognized by its customer.

Yes, those cash collections for relate to car sales to generate the credits absent. These regulatory credit sales Tessa would have reported a loss.

Dallas Glass returned 1.3% in July <unk> 2020 year to date result for solace class to negative 6.6% net exposure was approximately 18% long in the investment portfolio at the ended the second quarter and roughly 16% at the end of July.

While the cobot 19 pandemic has brought much uncertainty to the financial markets were excited about the hardening reinsurance market coupled with the opportunities in our investment portfolio.

We plan to increase the investment portfolio throughout the rest of the year from roughly one third of Greenlight re surplus to 50% of surplus while diversifying the composition further.

As Tim will discuss we made substantial share repurchases during the quarter, because we believe that 55% of book value as our markets are improving this is the best investment we can make now I'd like to turn the call over to Tim to discuss the financial results.

Thanks, David for the second quarter of 2020, Greenlight re reported a small net loss of $63000 compared to net income of $15.3 million for the comparable period in 2019.

For the six months ended June Thirtyth 2020, we reported a net loss of $40.3 million compared to net income of $21.2 million for the first six months of 2019.

The net loss per share was one dollar and 12 cents compared to net income of 58 cents per fully diluted share the same period in 2019.

Net premiums earned were $219.4 million for the first six months of 2020, a decrease of 11% from the prior year period.

Both gross and ceded premiums written decrease from the prior year, primarily due to the nonrenewal of certain auto business.

Partially offsetting the gross premium decrease was new business being written in several specialty lines, including crop energy and cyber business.

The company reported a small underwriting loss of $1.3 million during the quarter and a combined ratio of one or 1.2%.

As Simon mentioned the quarter's results included coded 19, net loss estimates of $6 million, which added 5.5 percentage points to the combined ratio.

The combined ratio for the year to date was 100%, which includes 2.7 percentage points of estimated [laughter].

Thank you general and administrative expenses incurred during the first half of 2020 were $12.9 million, which is a decrease of $1.8 million or approximately 12% over the prior year period.

This decrease was primarily due to lower personnel costs and to a lesser extent lower travel office and related costs incurred during the second quarter from shelter in place orders.

We reported total net investment income of $5.5 million during the second quarter 2020, which includes net investment income of 1.6 million on our investment in solus glass, reflecting a net gain of 30 basis points on the Solus glass fund.

Other net investment income contributed $3.9 million during the quarter.

A significant reduction in investment income on collateral assets, resulting from interest rate reductions in March was more than offset by valuation gains on certain innovation investments during the quarter.

During the second quarter, the company repurchased approximately 1.16 million shares at an average cost of $6.69 per share on average a discount of approximately 43% from the company's March 30, Onest fully diluted book value.

Fully diluted book value per share as of June Thirtyth 2020 was $11.81, a 1.5% increase from $11.63 per share reported at March 30, Onest 2020, and a decrease of 13% from $13.58 per share reported at June Thirtyth two.

2019.

Our annual shareholders meeting, which usually takes place in the second quarter of the year. We'll now take place on October 29, 2020, a meeting was moved to the logistics of shelter in place orders in the Cayman Islands.

Now I'll turn the call back to the operator and open it up for questions.

Thank you we will now begin my question answer session. She would like to ask your question. Please press Star then one of your Touchtone phone.

If you were using a speakerphone please pick up your handset before pressing the keys.

With that anytime your question has been addressed and he would like to withdraw your question. Please press Star then too.

We'll now pause momentarily to assemble our roster.

Again, if you would like to ask your question. It is star then one on your Touchtone. So.

All right, Steve pause momentarily, while we assemble hour Sir.

And the first question will come from mutual about solo was so low capital management. Please go ahead.

Thank you for taking my question.

Shortness.

You can size wise.

Huh.

Related to jure far from our completing the buyback.

Orientation.

But I.

I would lead you to can you just some color on whether it's your intention is a discount remains where it is today.

What did you be completing the.

Yeah. So decision soon how we did you read new route to keep on bank. Thank you.

Miquel. Thanks for the question this is Simon.

So.

As David said.

The opportunity to buyback shares at the current discount is.

As a tremendous of course, we'd like to see the discount reverse ultimately.

It is a balance between competing interests of using the capital to support business, where as you heard there a tremendous amounts of opportunities on the market opportunities around the improving.

But for now the the buyback is is continuing and we'll we'll evaluate that evaluate last as it goes.

Okay. Thank you.

Again, if you would like to ask your question. Please press Star then one.

At this time. It appears there are no questions. My question would you and this will conclude the question answer session as well as today's conference. Thank you for attending today's conference and you may now disconnect.

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